Question 5 (a)

Branch accounting and departmental accounting

6 marks

Time to write: About 12 minutes
Topic: Departmental accounts
Notes: Crux notes

Question

Question 5 (a) · 6 marks

Differentiate between Branch and Departmental Accounting.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

12 minfor 6 marks

Read from the question

Differentiate betweenSet the differences out in a table, basis by basis, not as two separate essays.

Write it in this order

Read; underline the asks; jot your points 1 min
1 Meaning of branch and of departmental accounting 2 marks 3 min
2 Differences: location, maintenance of accounts, allocation, reconciliation 3 marks 5 min
3 Differences: methods and transfers 1 mark 2 min
Check: every ask answered, key terms underlined 1 min

123

Easy marks

Step 1 opens with the meaning: a one-line definition, the quickest mark in it.

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks. End with step 3 in a line or two.

Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Meaning. A branch is a unit of the business set up at a place away from the head office, and branch accounting records the results of each branch. Dependent branches sell what the head office sends them, and the head office keeps their accounts by the debtors system, the stock and debtors system, the final accounts method or the wholesale branch method. A department is a section of the business under the same roof, and departmental accounting keeps accounts for each department so that the progress of the business and of every department can be seen.

Picture itBranch accounting and departmental accounting

1One roof, one meter, many counters—clothes, toys, utensils share the bills under one roof.

Departmental accountingAll departments are at one place, under one roof; common expenses are apportioned between departments on a suitable basis.

2Shops scattered across the map—hill, town, seaside—each paying its own way.

Branch accountingBranches are at different places; each branch bears its own expenses.

#	Basis	Departmental accounting	Branch accounting
1	Location	All departments are at one place, under one roof	Branches are at different places
2	Who keeps the accounts	The records are kept centrally, by the head office	An independent branch keeps its own accounts; a dependent branch's are kept by the head office
3	Allocation of common expenses	Common expenses are apportioned between departments on a suitable basis	No apportionment is needed; each branch bears its own expenses
4	Reconciliation	No reconciliation is needed	An independent branch's accounts must be reconciled with the head office's
5	Methods	Separate books for each department, or joint (columnar) accounts	Debtors, stock and debtors, final accounts or wholesale branch method; independent branches keep full books
6	Inter-unit transfers	Goods passed between departments are usually at cost or at an agreed price, and any unrealised profit in stock is reserved	Goods are sent at cost or at invoice price; the loading is removed through stock reserve and adjustment entries

Sources for the table. Rows 1 to 4 follow the DU text's comparison of departmental and branch accounting. Row 5 follows its two methods of departmental accounting and its methods for dependent branches. Row 6 sets out how inter-departmental transfers and branch loading are each handled.

Where the 6 marks sit

#	Component	Marks
1	Meaning of branch and of departmental accounting	2
2	Differences: location, maintenance of accounts, allocation, reconciliation	3
3	Differences: methods and transfers	1
	Total	6

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